This memorandum responds to the Sub-Committee's requests at the hearing on 1 November 2006.

  I wrote to you on 20 November 2006 concerning my promise to provide to your Committee details about the Royal Mint's bonus scheme when it was put in place.

  I provided details about the bonus scheme which had operated for 2005-06, but explained that the Royal Mint's Remuneration Committee had endorsed my view that no bonus scheme should be put in place for 2006-07. This was because, as I indicated to your Committee (Questions 58 to 61), [1]setting targets for a 2006-07 bonus scheme would have been so dependent on the success of the various improvement programmes which had recently been put in place.

  I noted that the Remuneration Committee would review the position again in 2007 with a view to introducing a new bonus scheme for 2007-08, and I promised to update your Committee on progress at that time.

  The Remuneration Committee has now agreed that the following bonus scheme will operate for 2007-08:

—    The purpose of the bonus scheme is to recognise and reward outstanding team performance against planned business targets and as such is subject to the following conditions:

—    The bonus scheme will apply to Functional Managers (a group of up to 18 senior managers) and the maximum bonus payable is 15% of salary earned as a Functional Manager during the financial year.

—    The bonus scheme will also apply to executive directors and the maximum bonus payable to this group is 25% of salary earned during the financial year.

—    The bonus measure is retained profit excluding exceptional costs. No bonus is paid if this measure is below plan. The size of bonus increases progressively depending on the extent to which performance exceeds plan, with the maximum bonus paid if this measure exceeds plan by 20%.

—    Bonuses will be paid in the month following the publication of the annual report to relevant personnel subject to them remaining in employment with the Royal Mint on 31 March 2008.

September 2007